Oregon, New York, Pennsylvania: the prevailing-wage fight is the labour question modular can't lobby its way out of.

On August 20, 2026, the Modular Building Institute, represented by the Pacific Legal Foundation, sued the Commissioner of Oregon's Bureau of Labor and Industries in federal court.^1,2 The target is HB 2688, in force since July 1, which expands Oregon's definition of "public works" to include off-site custom fabrication and — this is the part that drew the lawsuit — purports to apply Oregon prevailing-wage rates to fabrication facilities outside Oregon when the product is destined for an Oregon public project. MBI's argument is that a state cannot regulate wages in another state's factory; that is a dormant Commerce Clause claim, and it is not frivolous.

Oregon is the third state in a year to try something like this, and the pattern matters more than any one case. It marks the moment at which organised labour stopped treating modular as a curiosity and started treating it as a place where public-works wage standards go to disappear. The industry's response has been legal and legislative, and largely effective. What it has not been is an answer to the underlying question.

Twelve months, three states

Pennsylvania, July 2025. Senate Bill 908 would extend the state's prevailing-wage law from public-works job sites into the manufacturing facilities producing modular components for those projects. MBI's statement in opposition cited cost, lead time and the practical impossibility of wage-tracking on a factory floor where a single line builds modules for several projects, only some of them public.⁵ The bill has not become law.

New York, December 2025. Governor Hochul signed an expansion of Labor Law §220 covering off-site custom fabrication — wall panels, ductwork, rebar cages, mechanical insulation and, by name, modules — where the product is "solely and specifically designed" for a public project. After lobbying that MBI describes as leading, a clean-up amendment narrowed "custom fabrication" to exclude stock or readily available components and removed the out-of-state enforcement language, which in MBI's account largely exempted standard modular work.³ Separately, in May 2026 the Associated General Contractors of New York and allied trade groups sued in the Northern District, and on June 8 a consent order preliminarily enjoined enforcement pending further proceedings.⁴

Oregon, July–August 2026. HB 2688 took effect; MBI says it spent eighteen months in dialogue with the state before filing.¹ The suit is pending.

The industry's case

Strip out the constitutional argument, which is for a court, and the industry's operational case is coherent. Prevailing-wage regimes are built for a job site: one project, one location, one classification of work per worker per day. A modular factory is none of those things. The same crew on the same line may frame a wall for a public school in the morning and a private hotel after lunch. Applying a site-based wage determination to that environment requires either paying site rates for all work — which erases much of the labour-cost advantage that makes factory production viable in high-wage states — or building a tracking apparatus that costs more than it distributes. Manufacturers in low-cost states shipping into Oregon or New York would face a wage rule written for Portland or Manhattan. Some would simply stop bidding public work, which would shrink the pipeline that public buyers say they want to grow.

There is also the reciprocity problem we have written about before, now arriving in wage form. A factory in Idaho serving five western states already holds five sets of approvals. Five sets of extraterritorial wage determinations would be a step further, and the industry is right that it would fall hardest on exactly the multi-state manufacturers the scale story depends on.

Labour's case

Labour's case is equally coherent and rarely stated in the trade press. Prevailing-wage laws exist so that public money does not undercut local wage standards. If a state pays for a school and the walls are built in a lower-wage jurisdiction by workers earning half the local carpenter's rate, the law's purpose is defeated regardless of where the framing happened. The building trades are not wrong that "off-site" has become, in some hands, a route around a standard rather than a better way to meet it.

There is a second point the trades make less often but should. Factory work is safer. The historical Bureau of Labor Statistics comparison shows construction's fatal-injury rate at roughly four times manufacturing's.⁷ Moving hours indoors is a benefit to workers that labour ought to want; the fight is over whether it comes with a pay cut attached. And some locals have taken that position constructively — Northern California carpenters partnered with Factory_OS on training and staffing in that plant's early years — which suggests the conflict is about terms, not the method.

The missing number

That ratio is the missing number in this debate, and it is striking that after a decade of "modular will fix construction productivity" nobody has published it. McKinsey's 2017 estimate that construction labour productivity grew about one percent a year against 3.6 percent in manufacturing is the foundation of the sector's macro case.⁶ If factory production captures even a fraction of that gap, there is a surplus to share, and a manufacturer that pays factory workers well and still undercuts site cost has a story labour cannot easily oppose. If, on the other hand, the factory's advantage is mostly that it pays less in a cheaper place, then prevailing-wage extensions simply price the arbitrage back in and the trades are right to pursue them.

We searched for a published comparison of modular factory wages against site trades for equivalent work and found none — not from MBI, not from the unions, not from Terner or the Bureau of Labor Statistics at a usable level of detail. The nearest thing is Terner's March 2026 Potential Pathways report, which lists workforce as one of seven policy themes for scaling factory-built housing in California and gathered input from the trades alongside manufacturers and lenders, but does not put a number on the wage differential.⁸ Until someone does, both sides are arguing from anecdote, and the side with the better lobbyists wins each round without the question being settled.

Why public buyers decide this

The reason this matters beyond three statehouses is that the most reliable modular successes anywhere are public programmes buying standardised housing at scale: British Columbia's 606 supportive homes, Hong Kong's twenty thousand MiC flats, Singapore's mandated PPVC.⁹ Public buyers are the captive, long-horizon clients that make factory investment rational. They are also, without exception, subject to public-works wage rules. An industry that treats prevailing wage as an existential threat is declaring war on its best customer's procurement code.

The alternative is to negotiate the terms on which factory work counts as public work. That means a wage determination written for a production line rather than a job site: a factory classification, an area rate keyed to the plant's location with a floor keyed to the project's, an apprenticeship ratio that fits a line, and a reporting regime that a multi-project floor can actually run. It is more work than a lawsuit and less satisfying than a press release. It is also the only path to the pipeline. Colorado, notably, has done the opposite of Oregon — funding factory capacity through its Innovative Housing Incentive Program rather than regulating factory wages — and it will be instructive to compare the two states' modular output in five years.

What to do with this

If you manufacture, publish your wage scale against the local building-trades rate before a legislature makes you. If the comparison is unflattering, that is the business problem, not the disclosure. If you represent workers, pursue a factory classification rather than an extraterritorial rule that courts may strike and that manufacturers will route around by declining public bids. If you are a public buyer, write the wage terms into the procurement — and then commit to the volume that makes those terms affordable. And if you are watching from outside, the case to follow is MBI v. Stephenson; the number to demand is the one nobody has published.